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Renren chairman and CEO Joseph Chen on the floor at the New York Stock Exchange, May 4, 2011. Photo: Reuters
Opinion
Mr. Shangkong
by George Chen
Mr. Shangkong
by George Chen

China tech firms that delisted from Wall Street are now stuck

If former Wall Street-listed tech firms can't relist in Mainland China, will they be welcome in Hong Kong?

Still remember the news? Just a few weeks ago, more than 20 Chinese internet firms listed in the United States were leaving Wall Street via delistings as many of them were dreaming about relisting in China for higher valuations.

Those who decided to delist must regret deeply now as few of them could have predicted a stock market crash - one of the worst in years - in China in recent weeks.

On Saturday, Beijing decided to suspend new listings until the market stabilised. This suspension decision – directly coming from the State Council led by Premier Li Keqiang – could  mean those internet firms that delisted from Wall Street are  stuck.

Blame whom? Blame yourself and your greed.

In a recent Mr. Shangkong column, I explained why we were suddenly seeing a bunch of Chinese internet firms deciding to leave Wall Street. Chinese regulators welcomed them back partly because Beijing wants those technology and internet leaders to set good examples to promote Premier Li's new "Internet Plus" strategy to transform the structure of the Chinese economy, which is in its worst shape in over a decade.

On the other hand, many internet business leaders can't help thinking about relisting in China, especially on the Nasdaq-style, technology sector-focused ChiNext market in Shenzhen. Its benchmark index gained over 130 per cent from the beginning of the year to early June before crashing.

Before the crash, many internet firms could easily see their valuation double or even triple within a few weeks. In comparison, inactive trading and low valuations on Wall Street for Chinese internet firms certainly forced senior executives at those US-listed Chinese firms to rethink.

Remember the old saying? The more haste, the less speed. When they were in a hurry to return to China, few realised a crisis was already under way.

Last Wednesday, when asked by the media if Renren, often dubbed the "Facebook of China", wanted to relist on the mainland, its chief operating officer Liu Jian poured cold water over the Chinese stock markets, saying he simply "does not understand" the domestic markets at this moment.

We began to hear more market buzz that those who delisted from the US recently were now considering listing in Hong Kong. In other words, as Beijing closed windows for listings, Hong Kong would naturally be the Plan B for firms seeking to relist in order to get a new platform for sustainable public capital-raising.

The next billion-dollar question is whether Hong Kong regulators would welcome listings by fancy - or risky in some analysts' view - internet firms? If a company picks, and picks again, its listing destination mainly for high valuation, then such a come-and-go story could be repeated as their greed grows.

 

This article appeared in the South China Morning Post print edition as: Greedy China tech firms are now stuck
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